We can all agree on one thing, so let’s start there: Saskatchewan is broke.
Okay, two things – we all know resource revenues are low. Oil prices plunged two years ago, in January 2015, and have stayed low ever since. The potash market is stagnant.
But this notion, peddled by the Saskatchewan government, that our province’s empty bank account is a result of those reduced resource revenues?
What’s even worse is the cowardly demonization of the public service as a decoy for their undisciplined, reckless and, frankly, amateurish approach to managing (or not) Saskatchewan’s books.
See, over the last few weeks I’ve spent my spare time (namely those precious hours between when I wake up at 5am and when my kids wake up for school), deep-diving into Saskatchewan’s Public Accounts.
As you know, every spring the Saskatchewan government presents us with The Budget.
Budget Day is kind of like Christmas in the Legislature – everyone gets dressed up, and piles of visitors (most of whom detest each other) descend on the building to eat cake, watch people fight, and then sneak off to drink in Uncle Ken’s office.
The Budget document is the Christmas meal, presented with love by Mom, or in this case, the Finance Minister. It looks good and tastes great.
Public Accounts are what you get after eating that Christmas meal, digesting it, and…well, you get the picture.
Every year, in three massive Public Accounts Volumes, the government reports what they actually earned, and actually spent, the year before.
It should come as no surprise that Public Accounts never, ever looks like The Budget. In fact, you’ve probably never heard of Public Accounts, because it reports the unvarnished truth, and no government is going to give you that with any fanfare.
2017 Budget Day is March 22nd, and Finance Minister Doherty and Premier Brad Wall are enthusiastically getting us all ready by handing out Vaseline and telling us to bend over.
“Everything is on the table,” they insist, over and over and over, lest any one of us think we are safe.
To be clear, the SaskParty are masters of messaging – of floating ominous trial balloons and lowering our expectations, just so they can exceed them.
The best example of this is probably Wall’s 2015 threat to cut back Municipal Revenue Sharing, which sent City and Town Councils into a tizzy. It never happened, and was probably never going to, but the threat sure set up a bunch of people to be really, really happy when they didn’t get screwed after all.
This time though, it’s different. After presenting a Budget in June 2016 with an operating (or General Revenue Fund) debt of approximately $400 million, the mid-year financial report released six months later, in November 2016, had that debt up to $1 billion.
Now, being in debt isn’t new in Saskatchewan – we’ve been billions of dollars in Summary debt for decades. It’s not even unreasonable, for things like infrastructure, any more than it’s unreasonable for you and I to take out a mortgage to buy a house.
What’s the difference between the operating/General Revenue Fund (GRF) Budget and the Summary Budget? And if we’ve been in debt for thirty years, why is it suddenly a big deal now?
Start by considering the provincial General Revenue Fund (GRF) budget the same as your household budget. Every month you measure your earnings against what you have to pay to keep a roof over your head, wheels in your driveway, lights on and food on your table. Some months are going to be better than others, but overall you keep the bills paid so you and your family can function happily.
A Summary budget is what happens when you take all of your earnings and expenses, and then factor in the outstanding mortgage on your house, your line of credit and your credit cards. Maybe you have a business, or even two or three, that carry debt, so that would get thrown into your Summary budget too.
Clearly those are two very different financial pictures.
Your General budget is likely fairly balanced, even if you have to put the cable bill on your credit card once in a while.
Unless you own your home, your Summary budget is probably not as rosy. In fact, on paper you’re probably a few hundred thousand dollars in debt (though hopefully that debt is offset by the value of your home and other assets, which isn’t necessarily the case for the province).
Fast forward to today – the Summary budget has ran a multi-billion dollar deficit for years, but now the GRF budget is in deficit too.
In other words, these days Saskatchewan is not even earning enough to keep its lights on.
This brings us back to the government’s demonization of the public service and handwringing over lower resource revenues.
To deflect our attention away from the real problem, Saskatchewan Finance Minister Kevin Doherty has suggested that instead of rolling back wages, he would instead treat government employees to one unpaid day off per month.
The premise being, of course, that Saskatchewan’s cash problems are thanks to a public service that is a gluttonous, lazy, overpaid pit.
That, coupled with this message,
…paints a picture of money problems that are out of the innocent hands of the victimized-by-the-economy Saskatchewan government.
But don’t take my word for it. Let’s look at the numbers, shall we?
Looking at the trends in Chart 1.0, we see that resource revenues have ebbed and flowed. The huge spike in resources in 2009 was thanks to record-high potash prices. Otherwise, with the exception of 2010 and 2016, resource revenues have stayed relatively constant, with potash increases often offsetting any reduction in oil, or vice versa.
But look closer at 2010, when resource revenues were down to $1.9 billion (which isn’t much more than today): taxation revenue went way up (almost $1 billion) and we were able to withdraw a record $1.25 billion out of Saskatchewan Crown Corps, keeping our GRF on an even keel.
Fast forward to 2016, and we see almost the exact same ratio of taxation revenue to resource revenue as we did in 2010. What we don’t see in 2016, however, is an extra half a billion dollars snagged out of the Crown Corporations.
You also don’t see (because it’s recorded as ‘Other’) the withdrawals from the Growth & Financial Security (aka “rainy day”) Fund (GFSF).
I’m not going to get into the contentious politics behind the GFSF, and whether or not it was ever a valid account, because this piece is too long already. The bottom line is that regardless of how it got there, there was $1.6 billion cash in that account in 2007, and now it’s empty.
Since 2007, we steadily transferred cash out of the GFSF to pay the province’s bills when general revenues just weren’t going to cut it. Now that well is dry.
Chart 2.0 also reflects the steady increase of general and Crown Corp debt on a Summary basis (remember, that’s like your financial profile including your mortgage and credit cards).
Crown Corporation debt is double what it was ten years ago.
Significant, because in 2010, the provincial government helped themselves to a big chunk of cash from the Crowns, which offset low resource revenue.
Thanks to an economic downturn coupled with that massive crown debt, it would appear that isn’t an option any more.
Which brings us back to reducing government employees’ salaries and output by one day per month, or 5%. It has been a wildly successful diversionary tactic, moving the public narrative away from scrutiny of government spending, and onto whether public service employees should have to suffer financially because resource workers and the government are doing the same.
Spending, though, is exactly where we should be looking.
Chart 3.0 is a snapshot of Saskatchewan government’s spending since 2007. Please note that it does not include all Ministries and agencies – I focused on the biggies, and I’m confident it is an accurate reflection of our major spending priorities.
Since 2007, education, healthcare and municipal revenue sharing via government relations have seen huge spending increases, which would be fabulous if they were sustainable – and please, let’s not talk about capital investments, given the state of some of our hospitals, lack of rural service-providers and rundown, overcrowded or rent-to-own (P3) schools.
Yes, we’ve enjoyed some serious highway improvements, and have a brand new stadium and Children’s Hospital, but we’ve also bought enough new vehicles to fill that stadium, and
lost spent a billion dollars on a carbon tax carbon capture and storage. There’s more, but I’ll examine specific expenditures by Ministry in a future post.
As for public service salaries,
Healthcare workers and teachers are not paid directly by the government, therefore aren’t included in 4.0. That also means it’s highly unlikely, if not illegal, for the government to try and force this one-day unpaid scenario on those sectors.
Therefore, the award for highest government-paid salaries goes to Corrections and then Social Services, meaning the biggest impact of a 5% reduction in public service workers would be on jail guards and social workers – what could possibly go wrong?
I mean, the best way to curb drone-drug-smuggling (which is super common and has been happening way more than either the federal or provincial government will admit) into a provincial corrections centre is less guards, obviously*.
And everyone knows that Saskatchewan social workers aren’t overwhelmed at all**.
Interesting that jail guards and social workers would be the target, since Executive Council (ie. the Premiers’ Office, government
spin doctors communications, political appointees) have seen one of the biggest increases in salary expenditures, and has the highest ratio of salaries to overall expenditures.
The Big 3 Crown Corporation salaries have also gone up, but nothing on par with the likes of Executive Council (though SaskTel directors and executive management have done well over the last decade):
Is Saskatchewan’s public service bloated? Probably.
But whose fault is that?
This was supposed to be a conservative-leaning government focused on reducing its own footprint, so if what they’re trying to tell us is their government has gotten too big, I feel duped.
Regardless, I can’t consider the way the Saskatchewan government has handled the prospect of streamlining public service – or even this deficit – credible, because all they’ve demonstrated so far is that they’re primarily interested in brazenly protecting their political tails by dividing and confusing the narrative, instead of even pretending to consider well-planned or strategic spending decisions.
What I know for sure that the mess we’re in is not just about reduced resource and taxation revenue (the latter of which has been at a record high, thanks in part to both increased population numbers and a run of successful years in agriculture).
No, the financial dumpster fire we’re fighting has everything to do with the fact that this government has jacked up spending – even with the best of intentions – to unsustainable levels, and has simultaneously ran out of money trees, aka the GFSF and the Crown Corporations, to continue to fund their spending habits.
And they don’t want us to talk about it – which means that we’d better start, right now.
For those of you who care, I’m Tammy Robert. I’m a writer, but pay the bills specializing in media and public relations. Email me anytime at firstname.lastname@example.org
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Just a question on the education spending. There is substantial increase from 2008 to 2009. That was when the provincial government took over taxation from municipalities (i.e. elected Boards/trustees). So I’m wondering if the big increase comes from the fact that it appears that the government made a substantial investment in education when in fact, it was simply a change in who actually paid the bills… municipalities vs the province… like getting an allowance from mom instead of dad and then mom saying look at how much more I’m spending on you :).
Just wondering… thx.
Hi Barry – that’s a great question, and I’ll definitely look into it and get back to you. Thanks so much for reading my blog! Tam
Great examination and very helpful work you have done.
I am unclear of your logic. If government spending has gone up, that means spending on salaries and hires for government managed programs and, as well as third party spending to health regions and PSE. Barring the crazy salaries of Exec Council which on the whole are too high, but of total gov spending represent very little. Crown salaries too, while reprehensible increases, are not GRF salaries. While in now way do i think Wall is the best premier, I want to make sure I am clear on what has gone wrong — in some regards this may be a sense of Wall couldn’t say no to the public when they wanted more money (a Devine problem). That does though mean we would see the same results as we have now…less spending on needed problems just not today but over the course of a number of years. Reminds me of how in the bureaucracy during the 35% nurses salary and the Norris raises to Universities, we use to say…wonder how he going to afford this in the long term?? We now know, though the UofR sure didn’t turn down that extra money!
Hi Ethel – thanks so much for your comment.
My logic (I think) is relatively simple – while we may be seeing a decline in certain revenues, had spending (on everything – capital transfers, goods and services, salaries etc) been more disciplined and more sustainable over the last decade, we wouldn’t be where we are. However, instead of being truly transparent on that fact, the current message from the provincial government is that our current financial situation stems from reduced revenues, and the solution to this problem somehow lies within public service salaries – which again, are up, but not that much in relation to other spending categories. Hopefully that makes sense? Thanks again, Tammy
Thanks. good reasoning. Indeed, transparency and discipline for sure. Had he said “no” more often the province would not be here today.
I do disagree though with part of your logic…government salaries equate to programs of than 3rd party transfers – but ultimately these too are salaries. the u of r spending is 65-75% salaries (and yes they public sector spending also in an economic sense). Wall should have been more disciplined. Note though, that the NDP lost in some way in 2007 because they were fiscally “tight” spenders. If you look at Sask political history this has always been the case.
BTW sadly, the sector no one is talking about, and who is bearing the brunt of these cuts disproportionately is the 3rd sector (not for profits). In being frank, this is the group i feel sorry for as a $1 cut to them is equal to more like $3 since they leverage that $1 so well.
Again, great work you are doing. Even if we disagree slightly.
Operating deficit, not operating debt.
I read the article very quickly and then looked at the charts for a line item for debt service charges. Did not see it unless that is the finance item. Forgive me if it was there. Most governments in Canada have a hefty debt service charge and looking at where it ranks in the mix can be helpful. For example, the last two federal budgets had a debt service charge (interest on the debt) of $25.7 billion and this next one is likely to be even higher as are those going forward. To put that in perspective, federally, interest on the debt is the third highest item in the budget and my prediction is that it will climb into second place soon. It is just behind health care and seniors but more than defence. That money is sent to people who are already well-off — a transfer to those who can afford to invest if you will. Many interesting details but the point is that if the Bank of Canada holds the federal debt of $620 billion (low estimate) that $25.7 billion interest is returned to the revenue side of the ledger. When the private sector holds the debt in part or mostly, that money is subject to taxes — maybe — and is lost to the government.This is in NO WAY an argument for austerity as the ConLibs campaign to do periodically but rather to return our method of financing to pre-1970 approaches. Here in Ontario, we had a public bank called POSO that the Cons sold in their austerity approaches. Alberta seems to have one but does not use it well from what I can tell. What about Saskatchewan? Here is a link to one of my articles/letters to the editor on the matter. http://www.mykawartha.com/opinion-story/5822132-the-myth-of-the-balanced-budget-narrative/.
In conclusion, the research that you are doing is excellent.
Hi Herb – thank you so much for your comment! You are absolutely right – the Finance line includes the debt servicing charge. I likely should have broke it out, but the charts were getting too big. 🙂
Debt financing charges have been going down, which is good. In 2011 it was $424 million, and in 2016 (fiscal year end March 31, 2016) it was $297 million. Not sure where we borrowed from, though it appears that the interest rates are all below 5%, and as low as 2.75%. Hopefully the progress reducing these charges won’t be undone by the situation we’re in now. Thanks again for reading!
The problem started in 2009 when the government received the windfall $4,600 in non-renewable resource revenues up from $2,340 in the previous year. Then the government went on a spending spree. It increased funding to Advanced Education by $222, Agriculture by $125 Corrections by $94, Municipal by $165. Thus the baseline revenue for a number of these departments suddenly increased in the neighborhood of 30%. 2009 should have been the year that the government created a sovereign wealth fund. Instead it got it self in a position where it would be pressured to keep increasing or at least maintaining funding to these new bottom lines.
Did the government think that it would benefit from such skyrocketing non-renewable resource revenues every year?
Notice also the sudden increases in spending prior to election years.
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Great work Tammy ! I follow these numbers as well. Wish everyone would. Right or wrong the big increases are in ed and health. 3 billion dollar increase. I suspect mostly wages. As in my business or any other we must address these issue. It would do the government well to be open, and produce these figures out in the media so people understood our problem now. Not just a revenue problem is right.
Tammy you are proving that the media (you) is/are dishonest. You put together a paper that says the money spent on healthcare and education should have been saved for a rainy day. You also say that the highways didn’t need work. Saskatchewan doesn’t need a children’s hospital. North Battleford and Moose Jaw were to make due with outdated facilities.
Crown corporations should never have to contribute to the rest of provincial citizens, after all if the crowns should charge us more for utilities and keep their money to pay all those consultants hundreds of dollars per hour. Oh let’s not forget those public employees. Those poor downtrodden souls, they shouldn’t have gotten a raise for the last ten years.
I think that instead of writing this kind of drivel, you should propose a solution rather than a critique. I just want to point out that you’ve reached back a decade trying to prove that Saskatchewans economic woes are the gouverments fault. Had they managed the ” rainy day” fund they could give the public services employees healthy raises instead of desperately looking for ways to reduce expenses.
Now before you come back saying that you didn’t directly say education,healthcare … didn’t need funding let me point out that you implied everything was just spending on frivolous expenses.
You have completely misread Tammy Robert’s analysis and thus are misrepresenting her findings and conclusions.
The source of problem is government overspending,and not just in health and education.
“The problem started in 2009 when the government received the windfall $4,600 in non-renewable resource revenues up from $2,340 in the previous year. Then the government went on a spending spree. It increased funding to Advanced Education by $222, Agriculture by $125, Corrections by $94, Municipal by $165. Thus the baseline revenue for a number of these departments suddenly increased in the neighborhood of 30%. 2009 should have been the year that the government created a sovereign wealth fund, rather than raiding the rainy day fund in future years.
When a government builds in 30% increases to department budgets, it is very difficult to cut them back. Note also once Agriculture and Municipal Affairs got those large increases in 2009they maintained that level and even higher levels of spending in subsequent years. Of course, that’s where the Sask Party base is located.
Somewhere in this mix is the Sask Party 4×4 program that saw a 15% reduction in the civil service over 4 years. Be interesting to see numbers of in-scope, out of scope and consultants over this period. Surprised to see salaries go up when numbers were supposed to be going down.